Just as succeeding in a competitive marketplace can be challenging, recruiting and retaining top talent can be expensive. Consequently, some employers require employees to sign noncompete agreements, sometimes called covenants not to compete.
A noncompete agreement is a provision in an employment contract that prevents an employee from either working for a competitor or starting a competing venture. Because these agreements are controversial, some states have outlawed them. In Texas, though, noncompete agreements may be legally enforceable in some situations.
Why are noncompete agreements controversial?
That individuals should be free to do the work they choose is a fundamental tenet of the free market. Because noncompete agreements restrict this freedom, they tend to be controversial. That is, those subject to noncompete clauses may have difficulty finding gainful employment without moving to a new geographic location.
When are noncompete agreements enforceable?
For a noncompete agreement to be enforceable in the Lone Star State, it typically must be reasonable in its scope. Stated differently, the noncompete agreement must not place overly broad restrictions on the employee. What constitutes a reasonable scope likely depends on a few factors, including the nature of the employer’s business and the proprietary information the employee may have.
How do employers enforce noncompete agreements?
Simply executing a noncompete agreement may be enough to dissuade an employee from competing against his or her former employer. If a company wants to enforce an agreement, though, it can probably do so in court.
In Texas, judges often enjoy wide latitude to reform noncompete agreements. Therefore, if the noncompete agreement does not pass legal muster initially, the court may come up with one that does.